2004 Long Term Incentive Compensation Plan



 Exhibit 10.9 
  
 EXTRA SPACE STORAGE INC. 
  
 2004 LONG TERM INCENTIVE COMPENSATION PLAN 
  







 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page


	1.	  	DEFINITIONS	  	1
	2.	  	EFFECTIVE DATE AND TERMINATION OF PLAN	  	5
	3.	  	ADMINISTRATION OF PLAN	  	5
	4.	  	SHARES AND UNITS SUBJECT TO THE PLAN	  	6
	5.	  	PROVISIONS APPLICABLE TO STOCK OPTIONS	  	7
	6.	  	PROVISIONS APPLICABLE TO RESTRICTED STOCK	  	10
	7.	  	PROVISIONS APPLICABLE TO PHANTOM SHARES	  	12
	8.	  	PROVISIONS APPLICABLE TO DIVIDEND EQUIVALENT RIGHTS	  	15
	9.	  	OTHER STOCK-BASED AWARDS	  	16
	10.	  	PERFORMANCE GOALS	  	16
	11.	  	TAX WITHHOLDING	  	16
	12.	  	REGULATIONS AND APPROVALS	  	17
	13.	  	INTERPRETATION AND AMENDMENTS; OTHER RULES	  	18
	14.	  	CHANGES IN CAPITAL STRUCTURE	  	19
	15.	  	MISCELLANEOUS	  	20

  

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 EXTRA SPACE STORAGE INC. 
  
 2004 LONG TERM INCENTIVE COMPENSATION PLAN 
  
 Extra Space Storage Inc., a self-administered and self-managed Maryland corporation, wishes to attract employees, Directors
and consultants to the Company and its Subsidiaries and induce employees, Directors and consultants to remain with the Company and its Subsidiaries, and encourage them to increase their efforts to make the Company’s business more successful
whether directly or through its Subsidiaries. In furtherance thereof, Extra Space Storage Inc. 2004 Long Term Incentive Compensation Plan is designed to provide equity-based incentives to employees, Directors and consultants of the Company and its
Subsidiaries. Awards under the Plan may be made to selected employees, Directors and consultants of the Company and its Subsidiaries in the form of Options, Restricted Stock, Phantom Shares, Dividend Equivalent Rights or other forms of equity-based
compensation. 
  
 1. DEFINITIONS. 
  
 Whenever used herein, the following terms shall have the meanings set forth
below: 
  
 “Articles of Amendment and Restatement” means
the Extra Space Storage Inc. Articles of Amendment and Restatement. 
  
 “Award,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock, Phantom Shares, Dividend Equivalent Rights and other
equity-based Awards as contemplated herein. 
  
 “Award
Agreement” means a written agreement in a form approved by the Committee to be entered into between the Company and the Participant as provided in Section 3. 
  
 “Beneficial Ownership” means ownership of Capital Stock by a Person who is or would be stated as an owner of such
Capital Stock either actually or constructively through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3) of the Code. The terms “Beneficially Own” and “Beneficially Owns” shall have
the correlative meanings. 
  
 “Board” means the Board of
Directors of the Company. 
  
 “Capital Stock” means the
Common Stock, CCSs and preferred stock that may be issued pursuant to Article V of the Articles of Amendment and Restatement. 
  
 “Capital Stock Ownership Limit” means 7% (by value or by number of shares, whichever is more restrictive) of the outstanding Capital Stock of
the Company, excluding any such outstanding Capital Stock which is not treated as stock for federal income tax purposes. The number and value of shares of outstanding Capital Stock of the Company shall be determined by the Board in good faith, which
determination shall be conclusive for all purposes hereof. For purposes of applying the Capital Stock Ownership Limit with respect to a Person holding CCSs, such Person shall be treated as holding the number of shares of Common Stock into which the
CCSs held by such Person are convertible at such time. 
  
 “Cause” means, unless otherwise provided in the Participant’s Award Agreement, (i) engaging in (A) willful or gross misconduct or (B) willful or gross neglect, (ii) repeatedly failing to adhere to the directions of superiors
or the Board or the written policies and practices of the Company or its Subsidiaries or its affiliates, (iii) the commission of a felony or a crime of moral turpitude, or any crime 
  

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 involving the Company or its Subsidiaries, or any affiliate thereof, (iv) fraud, misappropriation or embezzlement, (v) a
material breach of the Participant’s employment agreement (if any) with the Company or its Subsidiaries or its affiliates, or (vi) any illegal act detrimental to the Company or its Subsidiaries or its affiliates; provided, however, that, if at
any particular time the Participant is subject to an effective employment agreement with the Company, then, in lieu of the foregoing definition, “Cause” shall at that time have such meaning as may be specified in such employment agreement.

  
 “CCSs” means the non-voting contingent convertible
stock that may be issued pursuant to Article V of the Articles of Amendment and Restatement. 
  
 “Change in Control” means the happening of any of the following: 
  

	 	(i)	any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding (A) the Company, (B) any entity
controlling, controlled by or under common control with the Company, (C) any employee benefit plan of the Company or any entity described in clause (B), (D) with respect to any particular Participant, the Participant and any “group” (as
such term is used in Section 13(d)(3) of the Exchange Act) of which the Participant is a member), (E) Kenneth M. Woolley, his affiliates, associates and people acting in concert with any of the foregoing and (F) Spencer F. Kirk, his affiliates,
associates and people acting in concert with any of the foregoing, is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of
either (1) the combined voting power of the Company’s then outstanding securities or (2) the then outstanding Shares (in either such case other than as a result of an acquisition of securities directly from the Company); provided, however,
that, in no event shall a Change in Control be deemed to have occurred upon an initial public offering of the Common Stock under the Securities Act; or 

  

	 	(ii)	any consolidation or merger of the Company where the shareholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50% or more of the combined voting power of the securities of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate parent corporation, if any); or 

  

	 	(iii)	there shall occur (A) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are
owned by “persons” (as defined above) in substantially the same proportion as their ownership of the Company immediately prior to such sale or (B) the approval by shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company; or 

  

	 	(iv)	the members of the Board at the beginning of any consecutive 24-calendar-month period (the “Incumbent Directors”) cease for any reason other than due to death to
constitute at least a majority of the members of the Board; provided that any director whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the members of the Board then
still in office who were members of the Board at the beginning of such 24-calendar-month period, shall be deemed to be an Incumbent Director. 

  

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 “Code” means the Internal Revenue Code of 1986, as amended. 
  
 “Committee” means the Committee appointed by the Board under
Section 3. 
  
 “Common Stock” means the Company’s
Common Stock, par value $.01 per share, either currently existing or authorized hereafter. 
  
 “Common Stock Ownership Limit” means 7% (by value or by number of shares, whichever is more restrictive) of the outstanding Common Stock. The number and value of shares of outstanding Common Stock shall be
determined by the Board in good faith, which determination shall be conclusive for all purposes hereof. For purposes of applying the Common Stock Ownership Limit with respect to a Person holding CCSs, such Person shall be treated as holding the
number of Shares into which the CCSs held by such Person are convertible at such time. 
  
 “Company” means the Extra Space Storage Inc., a Maryland corporation. 
  
 “Constructive Ownership” means ownership of any Capital Stock by a Person who is or would be treated as an owner of such Capital Stock either
actually or constructively through the application of Section 318 of the Code, modified by Section 856(d)(5) of the Code. The terms “Constructively Own” and “Constructively Owns” shall have the correlative meanings. 

 
 “Director” means a non-employee director of the Company or its
Subsidiaries. 
  
 “Disability” means the occurrence of
an event which would entitle an employee of the Company to the payment of disability income under one of the Company’s approved long-term disability income plans or, in the absence of such a plan, unless otherwise provided by the Committee in
the Participant’s Award Agreement, a disability which renders the Participant incapable of performing all of his or her material duties for a period of at least 180 consecutive or non-consecutive days during any consecutive twelve-month period.

  
 “Dividend Equivalent Right” means a right awarded
under Section 8 of the Plan to receive (or have credited) the equivalent value of dividends paid on Common Stock. 
  
 “Excepted Holder” means any shareholder of the Company for whom an Excepted Holder Ownership Limit is created by the Articles of Amendment and
Restatement or by the Board. 
  
 “Excepted Holder Ownership
Limit” means, with respect to any Excepted Holder, the percentage limit established by the Board pursuant to the Articles of Amendment and Restatement, or as other wise established by the Board in its discretion, subject in all cases to the
requirements, limitations and adjustment provisions set forth in the Articles of Amendment and Restatement. 
  
 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 “Fair Market Value” per Share as of a particular date means (i) if Shares are then listed on a national stock
exchange, the closing sales price per Share on the exchange for the last preceding date on which there was a sale of Shares on such exchange, as determined by the Committee, (ii) if Shares are not then listed on a national stock exchange but are
then traded on an over-the-counter market, the average of the closing bid and asked prices for the Shares in such over-the-counter market for the last preceding date on which there was a sale of such Shares in such market, as determined by the
Committee, or (iii) if Shares are not then listed on a national stock exchange or traded on an over-the-counter market, such value as the Committee in its discretion may in good faith determine; provided that, where the Shares are 
  

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 so listed or traded, the Committee may make such discretionary determinations where the Shares have not been traded for
10 trading days. 
  
 “Grantee” means an employee,
Director and consultant granted Restricted Stock, Phantom Shares or Dividend Equivalent Rights or such other equity-based Awards as may be granted pursuant to Section 9 hereunder. 
  
 “Incentive Stock Option” means an “incentive stock option” within the meaning of Section 422(b) of the
Code. 
  
 “Non-Qualified Stock Option” means an Option
which is not an Incentive Stock Option. 
  
 “Option”
means the right to purchase, at a price and for the term fixed by the Committee in accordance with the Plan, and subject to such other limitations and restrictions in the Plan and the applicable Award Agreement, a number of Shares determined by the
Committee. 
  
 “Optionee” means an employee or Director
of, or consultant to, the Company to whom an Option is granted, or the Successors of the Optionee, as the context so requires. 
  
 “Option Price” means the exercise price per Share. 
  
 “Participant” means a Grantee or Optionee. 
  
 “Partnership Units” means any OP Units, Preferred Units, Junior Units or any other fractional share of the Partnership Interests as defined in,
and authorized pursuant to, the Agreement of Limited Partnership of Extra Space Storage LP, as amended from time to time, by and among ESS Holdings Business Trust I, a Massachusetts business trust and certain limited partners as set forth on Exhibit
A thereto. 
  
 “Person” means an individual,
corporation, partnership, limited liability company, estate, trust (including trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in
Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity; but does not include an underwriter acting in a capacity as such in a public offering of shares of
Capital Stock provided that the ownership of such shares of Capital Stock by such underwriter would not result in the Company being “closely held” within the meaning of Section 856(h) of the Code, or otherwise result in the Company failing
to qualify as a REIT. 
  
 “Phantom Share” means a right,
pursuant to the Plan, of the Grantee to payment of the Phantom Share Value. 
  
 “Phantom Share Value,” per Phantom Share, means the Fair Market Value of a Share or, if so provided by the Committee, such Fair Market Value to the extent in excess of a base value established by the
Committee at the time of grant. 
  
 “Plan” means the
Company’s 2004 Long Term Incentive Compensation Plan, as set forth herein and as the same may from time to time be amended. 
  
 “REIT” shall mean a real estate investment trust under Sections 856 through 860 of the Code. 
  
 “Restricted Stock” means an award of Shares that are subject to
restrictions hereunder. 
  

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 “Retirement” means the Termination of Service of a Participant with the Company under
circumstances which would entitle an employee of the Company to an immediate pension under one of the Company’s approved retirement plans, or, in the absence of such a plan, unless otherwise provided by the Committee in the Participant’s
Award Agreement, the Termination of Service (other than for Cause) of a Participant on or after the Participant’s attainment of age 65 or on or after the Participant’s attainment of age 55 with five consecutive years of service with the
Company and or its Subsidiaries or its affiliates. 
  
 “Securities Act” means the Securities Act of 1933, as amended. 
  
 “Settlement Date” means the date determined under Section 7.4(c). 
  
 “Shares” means shares of Common Stock of the Company. 
  

“Subsidiary” means any corporation (other than the Company), partnership or other entity at least 50% of the economic interest in the equity
of which is owned by the Company or by another subsidiary. 
  
 “Successor of the Optionee” means the legal representative of the estate of a deceased Optionee or the person or persons who shall acquire the right to exercise an Option by bequest or inheritance or by reason of the death of the
Optionee. 
  
 “Termination of Service” means a
Participant’s termination of employment or other service, as applicable, with the Company and its Subsidiaries. Cessation of service as an officer, or employee, Director and consultant shall not be treated as a Termination of Service if the
Participant continues without interruption to serve thereafter in another one (or more) of such other capacities. 
  
 2. EFFECTIVE DATE AND TERMINATION OF PLAN. 
  
 The effective date of the Plan is August     , 2004; provided, however, that the Plan shall not become effective unless and
until it is approved by the requisite percentage of the shareholders of the Company. The Plan shall terminate on, and no Award shall be granted hereunder on or after, the 10-year anniversary of the earlier of the approval of the Plan by (i) the
Board or (ii) the shareholders of the Company; provided, however, that the Board may at any time prior to that date terminate the Plan. 
  
 3. ADMINISTRATION OF PLAN. 
  
 (a) The Plan shall be administered by the Committee appointed by the Board. The Committee upon and after such time as it is covered by Section 16 of the
Exchange Act, shall consist of at least two individuals each of whom shall be a “nonemployee director” as defined in Rule 16b-3 as promulgated by the Securities and Exchange Commission (“Rule 16b-3”) under the Exchange Act and
shall, at such times as the Company is subject to Section 162(m) of the Code (to the extent relief from the limitation of Section 162(m) of the Code is sought with respect to Awards), qualify as “outside directors” for purposes of Section
162(m) of the Code; provided that no action taken by the Committee (including without limitation grants) shall be invalidated because any or all of the members of the Committee fails to satisfy the foregoing requirements of this sentence. The acts
of a majority of the members present at any meeting of the Committee at which a quorum is present, or acts approved in writing by a majority of the entire Committee, shall be the acts of the Committee for purposes of the Plan. If and to the extent
applicable, no member of the Committee may act as to matters under the Plan specifically relating to such member. Notwithstanding the other foregoing provisions of this Section 3(a), any Award under the Plan to a person who is a member of the
Committee shall be made and administered by the Board. If no Committee is designated by the Board to act for these purposes, the Board shall have the rights and responsibilities of the Committee hereunder and under the Award Agreements. 

 

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 (b) Subject to the provisions of the Plan, the Committee shall in its discretion as reflected by the
terms of the Award Agreements (i) authorize the granting of Awards to employees, Directors and consultants of the Company and its Subsidiaries; and (ii) determine the eligibility of an employee, Director or consultant to receive an Award, as well as
determine the number of Shares to be covered under any Award Agreement, considering the position and responsibilities of the employee, Director or consultant, the nature and value to the Company of the employee’s, Director’s or
consultant’s present and potential contribution to the success of the Company whether directly or through its Subsidiaries and such other factors as the Committee may deem relevant. 
  
 (c) The Award Agreement shall contain such other terms, provisions and conditions not inconsistent herewith as shall be
determined by the Committee. In the event that any Award Agreement or other agreement hereunder provides (without regard to this sentence) for the obligation of the Company or any affiliate thereof to purchase or repurchase Shares from a Participant
or any other person, then, notwithstanding the provisions of the Award Agreement or such other agreement, such obligation shall not apply to the extent that the purchase or repurchase would not be permitted under governing law. The Participant shall
take whatever additional actions and execute whatever additional documents the Committee may in its reasonable judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on the
Participant pursuant to the express provisions of the Plan and the Award Agreement. 
  
 4. SHARES AND UNITS SUBJECT TO THE PLAN. 
  
 4.1
In General. 
  
 (a) Subject to Section 4.2, and subject to
adjustments as provided in Section 14, the total number of Shares subject to Options or other equity-based Awards granted under the Plan, Shares of Restricted Stock and Phantom Shares granted under the Plan, in the aggregate, may not exceed
8,000,000. Shares distributed under the Plan may be treasury Shares or authorized but unissued Shares. Any Shares that have been granted as Restricted Stock or that have been reserved for distribution in payment for Options, Phantom Shares or other
equity-based Awards under Section 9 but are later forfeited or for any other reason are not payable under the Plan may again be made the subject of Awards under the Plan. 
  
 (b) Shares subject to Dividend Equivalent Rights, other than Dividend Equivalent Rights based directly on the dividends
payable with respect to Shares subject to Options or the dividends payable on a number of Shares corresponding to the number of Phantom Shares awarded, shall be subject to the limitation of Section 4.1(a). If any Phantom Shares, Dividend Equivalent
Rights or other equity-based Awards under Section 9 are paid out in cash, then, notwithstanding the first sentence of Section 4.1(a) above, the underlying Shares may again be made the subject of Awards under the Plan. 
  
 (c) The certificates for Shares issued hereunder may include any legend which
the Committee deems appropriate to reflect any restrictions on transfer hereunder or under the Award Agreement, or as the Committee may otherwise deem appropriate. 
  
 4.2 Options. 
  
 Subject to adjustments pursuant to Section 14, and subject to the last sentence of Section 4.1(a), Incentive Stock Options with respect to an aggregate of
no more than 8,000,000 Shares may be granted under the Plan. Subject to adjustments pursuant to Section 14, in no event may any Optionee receive Options for more than 2,000,000 Shares in any one year. The aggregate Fair Market Value, determined
as of the date an Option is granted, of the Common Stock for which any Optionee may be awarded Incentive Stock Options which are first exercisable by the Optionee during any calendar year under the 
  

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 Plan (or any other stock option plan required to be taken into account under Section 422(d) of the Code) shall not exceed
$100,000. 
  
 4.3 Participation Limitation 
  
 (a) Limitation of Ownership. No Award shall be issued under the Plan to any
person who after such Award would Beneficially or Constructively Own Capital Stock of the Company in excess of the Common Stock Ownership Limit or the Capital Stock Ownership Limit, unless the foregoing restriction is expressly and specifically
waived by action of the independent Directors of the Board; provided, however, that an Excepted Holder would be permitted to Beneficially or Constructively Own Shares in excess of such limits provided that such Shares are not in excess of the
Excepted Holder Ownership Limit for such Excepted Holder. 
  
 (b)
No award shall be issued under the Plan to any person who after such Award would Beneficially or Constructively Own Shares in the Company that would result in the Company being “closely held” within the meaning of Section 856(h) of the
Code, or otherwise failing to qualify as a REIT (including but not limited to ownership that would result in the Company owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Company (either directly or indirectly through its Subsidiaries) from such tenant would cause the Company to fail to satisfy any of the gross income requirements of Section 856(c) of the Code). 
  
 5. PROVISIONS APPLICABLE TO STOCK OPTIONS. 
  
 5.1 Grant of Option. 
  
 Subject to the other terms of the Plan, the Committee shall, in its
discretion as reflected by the terms of the applicable Award Agreement: (i) determine and designate from time to time those employees, Directors and consultants of the Company and its Subsidiaries to whom Options are to be granted and the number of
Shares to be optioned to each employee, Director and consultant; (ii) determine whether to grant Options intended to be Incentive Stock Options, or to grant Non-Qualified Stock Options, or both (to the extent that any Option does not qualify as an
Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option); provided that Incentive Stock Options may only be granted to employees of the Company or a “subsidiary” of the Company (as defined below); (iii) determine
the time or times when and the manner and condition in which each Option shall be exercisable and the duration of the exercise period; (iv) designate each Option as one intended to be an Incentive Stock Option or as a Non-Qualified Stock Option; and
(v) determine or impose other conditions to the grant or exercise of Options under the Plan as it may deem appropriate. For purposes of Section 5.1(ii), the term “subsidiary” shall mean, any corporation (other than the Company) that is a
“subsidiary corporation” with respect to the Company under Section 424(f) of the Code. In the event the Company becomes a subsidiary of another company, the provisions hereof applicable to subsidiaries shall, unless otherwise determined by
the Committee, also be applicable to any company that is a “parent corporation” with respect to the Company under Section 424(e) of the Code. 
  
 5.2 Option Price. 
  
 The Option Price shall be determined by the Committee on the date the Option is granted and reflected in the Award Agreement, as the same may be amended
from time to time. Any particular Award Agreement may provide for different Option Prices for specified amounts of Shares subject to the Option. The Option Price with respect to each Incentive Stock Option, or other Option intended to qualify for
relief from the restrictions of Section 162(m) of the Code, shall not be less than 100% (or, for 
  

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 Incentive Stock Options, 110%, in the case of an individual described in Section 422(b)(6) of the Code (relating to
certain 10% owners)) of the Fair Market Value of a Share on the day the Option is granted. 
  
 5.3 Period of Option and Vesting. 
  
 (a) Unless earlier expired, forfeited or otherwise terminated, each Option shall expire in its entirety upon the 10th anniversary of the date of grant or shall have such other term (which may be shorter, but not longer, in the case of Incentive Stock Options) as is set forth in the applicable Award Agreement (except
that, in the case of an individual described in Section 422(b)(6) of the Code (relating to certain 10% owners) who is granted an Incentive Stock Option, the term of such Option shall be no more than five years from the date of grant). The Option
shall also expire, be forfeited and terminate at such times and in such circumstances as otherwise provided hereunder or under the Award Agreement. 
  
 (b) Each Option, to the extent that the Optionee has not had a Termination of Service and the Option has not otherwise lapsed, expired, terminated or been
forfeited, shall first become exercisable according to the terms and conditions set forth in the Award Agreement, as determined by the Committee at the time of grant. Unless otherwise determined by the Committee at the time of grant, such stock
options shall vest ratably, in annual installments, over a four-year period beginning on the date of grant. Unless otherwise provided in the Award Agreement, no Option (or portion thereof) shall ever be exercisable if the Optionee has a Termination
of Service before the time at which such Option would otherwise have become exercisable, and any Option that would otherwise become exercisable after such Termination of Service shall not become exercisable and shall be forfeited upon such
termination. Notwithstanding the foregoing provisions of this Section 5.3(b), Options exercisable pursuant to the schedule set forth by the Committee at the time of grant may be fully or more rapidly exercisable or otherwise vested at any time in
the discretion of the Committee. Upon and after the death of an Optionee, such Optionee’s Options, if and to the extent otherwise exercisable hereunder or under the applicable Award Agreement after the Optionee’s death, may be exercised by
the Successors of the Optionee. 
  
 5.4 Exercisability Upon and
After Termination of Optionee. 
  
 (a) Subject to provisions
of the Award Agreement, in the event the Optionee has a Termination of Service other than by the Company or its Subsidiaries for Cause, other than by the Optionee for any reason, or other than by reason of death, Retirement or Disability, no
exercise of an Option may occur after the expiration of the three-month period to follow the termination, or if earlier, the expiration of the term of the Option as provided under Section 5.3(a); provided that, if the Optionee should die after the
Termination of Service, but while the Option is still in effect, the Option (if and to the extent otherwise exercisable by the Optionee at the time of death) may be exercised until the earlier of (i) one year from the date of the Termination of
Service of the Optionee, or (ii) the date on which the term of the Option expires in accordance with Section 5.3(a). 
  
 (b) Subject to provisions of the Award Agreement, in the event the Optionee has a Termination of Service on account of death, Disability or Retirement,
the Option may be exercised until the earlier of (i) one year from the date of the Termination of Service of the Optionee, or (ii) the date on which the term of the Option expires in accordance with Section 5.3. 
  
 (c) Notwithstanding any other provision hereof, unless otherwise provided in
the Award Agreement, if (i) the Optionee has a Termination of Service by the Company for Cause or (ii) the Optionee terminates employment with the Company and its Subsidiaries for any reason (other than on account of death, Retirement or Disability)
the Optionee’s Options, to the extent then unexercised, shall thereupon cease to be exercisable and shall be forfeited forthwith. 
  

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 5.5 Exercise of Options. 
  
 (a) Subject to vesting, restrictions on exercisability and other restrictions provided for hereunder or otherwise imposed in
accordance herewith, an Option may be exercised, and payment in full of the aggregate Option Price made, by an Optionee only by written notice (in the form prescribed by the Committee) to the Company specifying the number of Shares to be purchased.

  
 (b) Without limiting the scope of the Committee’s
discretion hereunder, the Committee may impose such other restrictions on the exercise of Incentive Stock Options (whether or not in the nature of the foregoing restrictions) as it may deem necessary or appropriate. 
  
 (c) If Shares acquired upon exercise of an Incentive Stock Option are
disposed of in a disqualifying disposition within the meaning of Section 422 of the Code by an Optionee prior to the expiration of either two years from the date of grant of such Option or one year from the transfer of Shares to the Optionee
pursuant to the exercise of such Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Optionee shall notify the Company in writing as soon as practicable thereafter of the date and terms of such
disposition and, if the Company (or any affiliate thereof) thereupon has a tax-withholding obligation, shall pay to the Company (or such affiliate) an amount equal to any withholding tax the Company (or affiliate) is required to pay as a result of
the disqualifying disposition. 
  
 5.6 Payment. 

 
 (a) The aggregate Option Price shall be paid in full upon the exercise of
the Option. Payment must be made by one of the following methods: 
  
 (i) a certified or bank cashier’s check; 
  
 (ii) other than as prohibited under Section 13(k) of the Exchange Act, the proceeds of a Company loan program or third-party sale program or a notice acceptable to the Committee given as consideration under such a
program, in each case if permitted by the Committee in its discretion, if such a program has been established and the Optionee is eligible to participate therein; 
  
 (iii) if approved by the Committee in its discretion, Shares of previously owned Common Stock, which have
been previously owned for more than six months, having an aggregate Fair Market Value on the date of exercise equal to the aggregate Option Price; 
  
 (iv) other than as prohibited under Section 13(k) of the Exchange Act, if approved by the Committee in its discretion, through the written
election of the Optionee to have Shares withheld by the Company from the Shares otherwise to be received, with such withheld Shares having an aggregate Fair Market Value on the date of exercise equal to the aggregate Option Price; or 
  
 (v) by any combination of such methods of payment or any
other method acceptable to the Committee in its discretion. 
  
 (b) Except in the case of Options exercised by certified or bank cashier’s check, the Committee may impose limitations and prohibitions on the exercise of Options as it deems appropriate, including, without limitation, any limitation
or prohibition designed to avoid accounting consequences which may result from the use of Common Stock as payment upon exercise of an Option. 
  

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 (c) The Committee shall provide in the Award Agreement the extent (if any) to which an Option may be
exercised with respect to any fractional Share, including whether any fractional Shares resulting from an Optionee’s exercise may be paid in cash. 
  
 5.7 Stock Appreciation Rights. 
  
 The Committee, in its discretion, may also permit the Optionee to elect to exercise an Option by receiving a combination of Shares and cash, or, in the
discretion of the Committee, either Shares or cash, with an aggregate Fair Market Value (or, to the extent of payment in cash, in an amount) equal to the excess of the Fair Market Value of the Shares with respect to which the Option is being
exercised over the aggregate Option Price, as determined as of the day the Option is exercised. 
  
 5.8 Exercise by Successors. 
  
 An Option may be exercised, and payment in full of the aggregate Option Price made, by the Successors of the Optionee only by written notice (as may be
prescribed by the Committee) to the Company specifying the number of Shares to be purchased. Such notice shall state that the aggregate Option Price will be paid in full, or that the Option will be exercised as otherwise provided hereunder, in the
discretion of the Company or the Committee, if and as applicable. 
  
 5.9 Nontransferability of Option. 
  
 Except if
otherwise provided in the applicable Award Agreement, each Option granted under the Plan shall be nontransferable by the Optionee except by will or the laws of descent and distribution of the state wherein the Optionee is domiciled at the time of
his death; provided, however, that the Committee may (but need not) permit other transfers, where the Committee concludes that such transferability (i) does not result in accelerated U.S. federal income taxation, (ii) does not cause any Option
intended to be an Incentive Stock Option to fail to be described in Section 422(b) of the Code, and (iii) is otherwise appropriate and desirable. 
  
 5.10 Deferral. 
  
 The Committee may establish a program under which Participants will have Phantom Shares subject to Section 7 credited upon their exercise of Options,
rather than receiving Shares at that time. 
  
 6. PROVISIONS APPLICABLE TO
RESTRICTED STOCK. 
  
 6.1 Grant of Restricted Stock.

  
 (a) In connection with the grant of Restricted Stock, whether
or not performance goals (as provided for under Section 10) apply thereto, the Committee shall establish one or more vesting periods with respect to the shares of Restricted Stock granted, the length of which shall be determined in the discretion of
the Committee. Subject to the provisions of this Section 6, the applicable Agreement and the other provisions of the Plan, restrictions on Restricted Stock shall lapse if the Grantee satisfies all applicable employment or other service requirements
through the end of the applicable vesting period. 
  
 (b) Subject
to the other terms of the Plan, the Committee may, in its discretion as reflected by the terms of the applicable Award Agreement: (i) authorize the granting of Restricted Stock to employees, Directors and consultants of the Company and its
Subsidiaries; (ii) provide a specified purchase price for the Restricted Stock (whether or not the payment of a purchase price is required by any state law applicable to the Company); (iii) determine the restrictions applicable to Restricted Stock
and 
  

 10 








 (iv) determine or impose other conditions, including any applicable performance goals, to the grant of Restricted Stock
under the Plan as it may deem appropriate. 
  
 6.2
Certificates. 
  
 (a) In the discretion of the Committee,
each Grantee of Restricted Stock may be issued a stock certificate in respect of Shares of Restricted Stock awarded under the Plan. A “book entry” (by computerized or manual entry) shall be made in the records of the Company to evidence an
award of Restricted Stock, where no certificate is issued in the name of the Grantee. Each certificate, if any, shall be registered in the name of the Grantee and may include any legend which the Committee deems appropriate to reflect any
restrictions on transfer hereunder or under the Award Agreement, or as the Committee may otherwise deem appropriate, and, without limiting the generality of the foregoing, shall bear a legend referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form: 
  
 THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE EXTRA SPACE STORAGE INC. 2004 LONG TERM INCENTIVE COMPENSATION PLAN AND AN AWARD
AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND EXTRA SPACE STORAGE INC. COPIES OF SUCH PLAN AND AWARD AGREEMENT ARE ON FILE IN THE OFFICES OF EXTRA SPACE STORAGE INC. AT 2795 EAST COTTONWOOD PARKWAY, SUITE 400, SALT LAKE CITY, UT 84121.

  
 (b) The Committee shall require that any stock certificates
evidencing such Shares be held in custody by the Company until the restrictions thereon shall have lapsed, and may in its discretion require that, as a condition of any Restricted Stock award, the Grantee shall have delivered to the Company a stock
power, endorsed in blank, relating to the stock covered by such Award. If and when such restrictions so lapse, any stock certificates shall be delivered by the Company to the Grantee or his or her designee. 
  
 6.3 Restrictions and Conditions. 
  
 Unless otherwise provided by the Committee, the Shares of Restricted Stock
awarded pursuant to the Plan shall be subject to the following restrictions and conditions: 
  
 (i) Subject to the provisions of the Plan and the Award Agreements, during a period commencing with the date of such Award and ending on
the date the period of forfeiture with respect to such Shares lapses, the Grantee shall not be permitted voluntarily or involuntarily to sell, transfer, pledge, anticipate, alienate, encumber or assign Shares of Restricted Stock awarded under the
Plan (or have such Shares attached or garnished). Subject to the provisions of the Award Agreements and clauses (iii) and (iv) below, the period of forfeiture with respect to Shares granted hereunder shall lapse as provided in the applicable Award
Agreement. Notwithstanding the foregoing, unless otherwise expressly provided by the Committee, the period of forfeiture with respect to such Shares shall only lapse as to whole Shares. 
  
 (ii) Except as provided in the foregoing clause (i), below in this clause (ii), or in Section 14, the
Grantee shall have, in respect of the Shares of Restricted Stock, all of the rights of 
  

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 a shareholder of the Company, including the right to vote the Shares, and, except as provided below, the
right to receive any cash dividends. The Committee may provide in the Award Agreement that cash dividends on such Shares shall be held by the Company (unsegregated as a part of its general assets) until the period of forfeiture lapses (and forfeited
if the underlying Shares are forfeited), and paid over to the Grantee as soon as practicable after such period lapses (if not forfeited), or alternatively may provide for other treatment of such dividends (including without limitation the crediting
of Phantom Shares in respect of dividends or other deferral provisions). Certificates for Shares (not subject to restrictions hereunder) shall be delivered to the Grantee or his or her designee promptly after, and only after, the period of
forfeiture shall lapse without forfeiture in respect of such Shares of Restricted Stock. 
  
 (iii) Termination of Service, Except by Death, Retirement or Disability. Unless otherwise provided in the applicable Award Agreement, and
subject to clause (iv) below, if the Grantee has a Termination of Service for Cause or by the Grantee for any reason other than his or her death, Retirement or Disability, during the applicable period of forfeiture, then (A) all Restricted Stock
still subject to restriction shall thereupon, and with no further action, be forfeited by the Grantee, and (B) the Company shall pay to the Grantee as soon as practicable (and in no event more than 30 days) after such termination an amount equal to
the lesser of (x) the amount paid by the Grantee for such forfeited Restricted Stock as contemplated by Section 6.1, and (y) the Fair Market Value on the date of termination of the forfeited Restricted Stock. 
  
 (iv) Death, Disability or Retirement of Grantee. Unless
otherwise provided in the applicable Award Agreement, in the event the Grantee has a Termination of Service on account of his or her death, Disability or Retirement, or the Grantee has a Termination of Service by the Company for any reason other
than Cause, during the applicable period of forfeiture, then restrictions under the Plan will immediately lapse on all Restricted Stock granted to the applicable Grantee. 
  
 7. PROVISIONS APPLICABLE TO PHANTOM SHARES. 
  

7.1 Grant of Phantom Shares. 
  
 Subject to the other terms of the Plan, the Committee shall, in its discretion as reflected by the terms of the applicable Award Agreement: (i) authorize
the granting of Phantom Shares to employees, Directors and consultants of the Company and its Subsidiaries and (ii) determine or impose other conditions to the grant of Phantom Shares under the Plan as it may deem appropriate. 
  
 7.2 Term. 
  
 The Committee may provide in an Award Agreement that any particular Phantom
Share shall expire at the end of a specified term. 
  
 7.3
Vesting. 
  
 Phantom Shares shall vest as provided in the
applicable Award Agreement. 
  
 7.4 Settlement of Phantom
Shares. 
  
 (a) Each vested and outstanding Phantom Share
shall be settled by the transfer to the Grantee of one Share; provided that, the Committee at the time of grant may provide that a Phantom Share may be settled (i) in cash at the applicable Phantom Share Value, (ii) in cash or by transfer of Shares
as elected by 
  

 12 








 the Grantee in accordance with procedures established by the Committee or (iii) in cash or by transfer of Shares as
elected by the Company. 
  
 (b) Each Phantom Share shall be
settled with a single-sum payment or distribution by the Company; provided that, with respect to Phantom Shares of a Grantee which have a common Settlement Date, the Committee may permit the Grantee to elect in accordance with procedures established
by the Committee to receive installment payments over a period not to exceed 10 years. 
  
 (c) (i) Unless otherwise provided in the applicable Award Agreement, the Settlement Date with respect to a Grantee is the first day of the month to follow the Grantee’s Termination of Service, provided that a
Grantee may elect, in accordance with procedures to be adopted by the Committee, that such Settlement Date will be deferred as elected by the Grantee to a time permitted by the Committee under procedures to be established by the Committee. Unless
otherwise determined by the Committee, elections under this Section 7.4(c)(i) must be made at least six months before, and in the year prior to the year in which, the Settlement Date would occur in the absence of such election. 
  
 (ii) Notwithstanding Section 7.4(c)(i), the Committee may
provide that distributions of Phantom Shares can be elected at any time in those cases in which the Phantom Share Value is determined by reference to Fair Market Value to the extent in excess of a base value, rather than by reference to unreduced
Fair Market Value. 
  
 (iii) Notwithstanding the
foregoing, the Settlement Date, if not earlier pursuant to this Section 7.4(c), is the date of the Grantee’s death. 
  
 (d) Notwithstanding the other provisions of this Section 7, in the event of a Change in Control, the Settlement Date shall be the date of such Change in
Control and all amounts due with respect to Phantom Shares to a Grantee hereunder shall be paid as soon as practicable (but in no event more than 30 days) after such Change in Control, unless such Grantee elects otherwise in accordance with
procedures established by the Committee. 
  
 (e) Notwithstanding
any other provision of the Plan, a Grantee may receive any amounts to be paid in installments as provided in Section 7.4(b) or deferred by the Grantee as provided in Section 7.4(c) in the event of an “Unforeseeable Emergency.” For these
purposes, an “Unforeseeable Emergency,” as determined by the Committee in its sole discretion, is a severe financial hardship to the Grantee resulting from a sudden and unexpected illness or accident of the Grantee or
“dependent,” as defined in Section 152(a) of the Code, of the Grantee, loss of the Grantee’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of
the Grantee. The circumstances that will constitute an Unforeseeable Emergency will depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved: 
  
 (i) through reimbursement or compensation by insurance or
otherwise, 
  
 (ii) by liquidation of the
Grantee’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or 
  
 (iii) by future cessation of the making of additional deferrals under Section 7.4(b) and (c). 
  

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 Without limitation, the need to send a Grantee’s child to college or the desire to purchase a home shall not
constitute an Unforeseeable Emergency. Distributions of amounts because of an Unforeseeable Emergency shall be permitted to the extent reasonably needed to satisfy the emergency need. 
  
 7.5 Other Phantom Share Provisions. 
  
 (a) Rights to payments with respect to Phantom Shares granted under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, garnishment, levy, execution, or other legal or equitable process, either voluntary or involuntary; and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, attach or garnish, or levy or execute on any right to benefits payable hereunder, shall be void. 
  
 (b) A Grantee may designate in writing, on forms to be prescribed by the Committee, a beneficiary or beneficiaries to receive any payments payable after
his or her death and may amend or revoke such designation at any time. If no beneficiary designation is in effect at the time of a Grantee’s death, payments hereunder shall be made to the Grantee’s estate. If a Grantee with a vested
Phantom Share dies, such Phantom Share shall be settled and the Phantom Share Value in respect of such Phantom Shares paid, and any payments deferred pursuant to an election under Section 7.4(c) shall be accelerated and paid, as soon as practicable
(but no later than 60 days) after the date of death to such Grantee’s beneficiary or estate, as applicable. 
  
 (c) The Committee may establish a program under which distributions with respect to Phantom Shares may be deferred for periods in addition to those
otherwise contemplated by foregoing provisions of this Section 7. Such program may include, without limitation, provisions for the crediting of earnings and losses on unpaid amounts, and, if permitted by the Committee, provisions under which
Participants may select from among hypothetical investment alternatives for such deferred amounts in accordance with procedures established by the Committee. 
  
 (d) Phantom Shares (including for purposes of this Section 7.5(d) any accounts established to facilitate the implementation of Section 7.4(c)), are solely
a device for the measurement and determination of the amounts to be paid to a Grantee under the Plan. Each Grantee’s right in the Phantom Shares is limited to the right to receive payment, if any, as may herein be provided. The Phantom Shares
do not constitute Common Stock and shall not be treated as (or as giving rise to) property or as a trust fund of any kind; provided, however, that the Company may establish a mere bookkeeping reserve to meet its obligations hereunder or a trust or
other funding vehicle that would not cause the Plan to be deemed to be funded for tax purposes or for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. The right of any Grantee of Phantom Shares to receive
payments by virtue of participation in the Plan shall be no greater than the right of any unsecured general creditor of the Company. 
  
 (e) Notwithstanding any other provision of this Section 7, any fractional Phantom Share will be paid out in cash at the Phantom Share Value as of the
Settlement Date. 
  
 (f) Nothing contained in the Plan shall be
construed to give any Grantee any rights with respect to Shares or any ownership interest in the Company. Except as may be provided in accordance with Section 8, no provision of the Plan shall be interpreted to confer upon any Grantee any voting,
dividend or derivative or other similar rights with respect to any Phantom Share. 
  

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 7.6 Claims Procedures. 
  
 (a) To the extent that the Plan is determined by the Committee to be subject to the Employee Retirement Income Security Act
of 1974, as amended, the Grantee, or his beneficiary hereunder or authorized representative, may file a claim for benefits with respect to Phantom Shares under the Plan by written communication to the Committee or its designee. A claim is not
considered filed until such communication is actually received. Within 90 days (or, if special circumstances require an extension of time for processing, 180 days, in which case notice of such special circumstances should be provided within the
initial 90-day period) after the filing of the claim, the Committee will either: 
  
 (i) approve the claim and take appropriate steps for satisfaction of the claim; or 
  
 (ii) if the claim is wholly or partially denied, advise the
claimant of such denial by furnishing to him a written notice of such denial setting forth (A) the specific reason or reasons for the denial; (B) specific reference to pertinent provisions of the Plan on which the denial is based and, if the denial
is based in whole or in part on any rule of construction or interpretation adopted by the Committee, a reference to such rule, a copy of which shall be provided to the claimant; (C) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of the reasons why such material or information is necessary; and (D) a reference to this Section 7.6 as the provision setting forth the claims procedure under the Plan. 
  
 (b) The claimant may request a review of any denial of his claim by written
application to the Committee within 60 days after receipt of the notice of denial of such claim. Within 60 days (or, if special circumstances require an extension of time for processing, 120 days, in which case notice of such special circumstances
should be provided within the initial 60-day period) after receipt of written application for review, the Committee will provide the claimant with its decision in writing, including, if the claimant’s claim is not approved, specific reasons for
the decision and specific references to the Plan provisions on which the decision is based. 
  
 8. PROVISIONS APPLICABLE TO DIVIDEND EQUIVALENT RIGHTS. 
  
 8.1 Grant of Dividend Equivalent Rights. 
  
 Subject to the other terms of the Plan, the Committee shall, in its discretion as reflected by the terms of the Award Agreements, authorize the granting
of Dividend Equivalent Rights to employees, Directors and consultants of the Company and its Subsidiaries based on the regular cash dividends declared on Common Stock, to be credited as of the dividend payment dates, during the period between the
date an Award is granted, and the date such Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalent Rights shall be converted to cash or additional Shares by such formula and at such time and subject to such
limitation as may be determined by the Committee. With respect to Dividend Equivalent Rights granted with respect to Options intended to be qualified performance-based compensation for purposes of Section 162(m) of the Code, such Dividend Equivalent
Rights shall be payable regardless of whether such Option is exercised. If a Dividend Equivalent right is granted in respect of another Award hereunder, then, unless otherwise stated in the Award Agreement, in no event shall the Dividend Equivalent
Right be in effect for a period beyond the time during which the applicable portion of the underlying Award is in effect. 
  
 8.2 Certain Terms. 
  
 (a) The term of a Dividend Equivalent Right shall be set by the Committee in its discretion. 
  

 15 








 (b) Unless otherwise determined by the Committee, except as contemplated by Section 8.4, a Dividend
Equivalent Right is exercisable or payable only while the Participant is an employee, Director or consultant. 
  
 (c) Payment of the amount determined in accordance with Section 8.1 shall be in cash, in Common Stock or a combination of both, as determined by the
Committee. 
  
 (d) The Committee may impose such
employment-related conditions on the grant of a Dividend Equivalent Right as it deems appropriate in its discretion. 
  
 8.3 Other Types of Dividend Equivalent Rights. 
  
 The Committee may establish a program under which Dividend Equivalent Rights of a type not described in the foregoing provisions of this Section 8 may be
granted to Participants. For example, and without limitation, the Committee may grant a dividend equivalent right in respect of each Share subject to an Option or with respect to a Phantom Share, which right would consist of the right (subject to
Section 8.4) to receive a cash payment in an amount equal to the dividend distributions paid on a Share from time to time. 
  
 8.4 Deferral. 
  
 (a) The Committee may establish a program under which Participants (i) will have Phantom Shares credited, subject to the terms of Sections 7.4 and 7.5 as
though directly applicable with respect thereto, upon the granting of Dividend Equivalent Rights, or (ii) will have payments with respect to Dividend Equivalent Rights deferred. 
  
 (b) The Committee may establish a program under which distributions with respect to Dividend Equivalent Rights may be
deferred. Such program may include, without limitation, provisions for the crediting of earnings and losses on unpaid amounts, and, if permitted by the Committee, provisions under which Participants may select from among hypothetical investment
alternatives for such deferred amounts in accordance with procedures established by the Committee. 
  
 9. OTHER EQUITY-BASED AWARDS. 
  
 The Board shall have the right to grant other Awards having such terms and conditions as the Board may determine, including the grant of shares of Capital Stock based upon certain conditions, the grant of Partnership Units based upon
certain conditions and the grant of stock appreciation rights. 
  
 10.
PERFORMANCE GOALS. 
  
 The Committee, in its discretion, may
establish one or more performance goals as a precondition to the issuance or vesting of Awards, and (ii) provide, in connection with the establishment of the performance goals, for predetermined Awards to those Participants (who continue to meet all
applicable eligibility requirements) with respect to whom the applicable performance goals are satisfied. 
  
 11. TAX WITHHOLDING. 
  
 11.1 In General. 
  
 The Company shall be
entitled to withhold from any payments or deemed payments any amount of tax withholding determined by the Committee to be required by law. Without limiting the generality 
  

 16 








 of the foregoing, the Committee may, in its discretion, require the Participant to pay to the Company at such time as the
Committee determines the amount that the Committee deems necessary to satisfy the Company’s obligation to withhold federal, state or local income or other taxes incurred by reason of (i) the exercise of any Option, (ii) the lapsing of any
restrictions applicable to any Restricted Stock, (iii) the receipt of a distribution in respect of Phantom Shares or Dividend Equivalent Rights or (iv) any other applicable income-recognition event (for example, an election under Section 83(b) of
the Code). 
  
 11.2 Share Withholding. 
  
 (a) Upon exercise of an Option, the Optionee may, if approved by the
Committee in its discretion, make a written election to have Shares then issued withheld by the Company from the Shares otherwise to be received, or to deliver previously owned Shares, in order to satisfy the liability for such withholding taxes. In
the event that the Optionee makes, and the Committee permits, such an election, the number of Shares so withheld or delivered shall have an aggregate Fair Market Value on the date of exercise sufficient to satisfy the applicable withholding taxes.
Where the exercise of an Option does not give rise to an obligation by the Company to withhold federal, state or local income or other taxes on the date of exercise, but may give rise to such an obligation in the future, the Committee may, in its
discretion, make such arrangements and impose such requirements as it deems necessary or appropriate. 
  
 (b) Upon lapsing of restrictions on Restricted Stock (or other income-recognition event), the Grantee may, if approved by the Committee in its discretion,
make a written election to have Shares withheld by the Company from the Shares otherwise to be released from restriction, or to deliver previously owned Shares (not subject to restrictions hereunder), in order to satisfy the liability for such
withholding taxes. In the event that the Grantee makes, and the Committee permits, such an election, the number of Shares so withheld or delivered shall have an aggregate Fair Market Value on the date of exercise sufficient to satisfy the applicable
withholding taxes. 
  
 (c) Upon the making of a distribution in
respect of Phantom Shares or Dividend Equivalent Rights, the Grantee may, if approved by the Committee in its discretion, make a written election to have amounts (which may include Shares) withheld by the Company from the distribution otherwise to
be made, or to deliver previously owned Shares (not subject to restrictions hereunder), in order to satisfy the liability for such withholding taxes. In the event that the Grantee makes, and the Committee permits, such an election, any Shares so
withheld or delivered shall have an aggregate Fair Market Value on the date of exercise sufficient to satisfy the applicable withholding taxes. 
  
 11.3 Withholding Required. 
  
 Notwithstanding anything contained in the Plan or the Award Agreement to the contrary, the Participant’s satisfaction of any tax-withholding
requirements imposed by the Committee shall be a condition precedent to the Company’s obligation as may otherwise be provided hereunder to provide Shares to the Participant and to the release of any restrictions as may otherwise be provided
hereunder, as applicable; and the applicable Option, Restricted Stock, Phantom Shares or Dividend Equivalent Rights shall be forfeited upon the failure of the Participant to satisfy such requirements with respect to, as applicable, (i) the exercise
of the Option, (ii) the lapsing of restrictions on the Restricted Stock (or other income-recognition event) or (iii) distributions in respect of any Phantom Share or Dividend Equivalent Right. 
  
 12. REGULATIONS AND APPROVALS. 
  
 (a) The obligation of the Company to sell Shares with respect to an Award
granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state 
  

 17 








 securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or
appropriate by the Committee. 
  
 (b) The Committee may make such
changes to the Plan as may be necessary or appropriate to comply with the rules and regulations of any government authority or to obtain tax benefits applicable to an Award. 
  
 (c) Each grant of Options, Restricted Stock, Phantom Shares (or issuance of Shares in respect thereof) or Dividend
Equivalent Rights (or issuance of Shares in respect thereof), or other Award under Section 9 (or issuance of Shares in respect thereof), is subject to the requirement that, if at any time the Committee determines, in its discretion, that the
listing, registration or qualification of Shares issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the issuance of Options, Shares of Restricted Stock, Phantom Shares, Dividend Equivalent Rights, other Awards or other Shares, no payment shall be made, or Phantom Shares or Shares issued or grant of Restricted
Stock or other Award made, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions in a manner acceptable to the Committee. 
  
 (d) In the event that the disposition of stock acquired pursuant to the Plan
is not covered by a then current registration statement under the Securities Act, and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required under the Securities Act, and the Committee
may require any individual receiving Shares pursuant to the Plan, as a condition precedent to receipt of such Shares, to represent to the Company in writing that such Shares are acquired for investment only and not with a view to distribution and
that such Shares will be disposed of only if registered for sale under the Securities Act or if there is an available exemption for such disposition. 
  
 (e) Notwithstanding any other provision of the Plan, the Company shall not be required to take or permit any action under the Plan or any Award Agreement
which, in the good-faith determination of the Company, would result in a material risk of a violation by the Company of Section 13(k) of the Exchange Act. 
  
 13. INTERPRETATION AND AMENDMENTS; OTHER RULES. 
  
 The Committee may make such rules and regulations and establish such procedures for the administration of the Plan as it deems appropriate. Without
limiting the generality of the foregoing, the Committee may (i) determine the extent, if any, to which Options, Phantom Shares or Shares (whether or not Shares of Restricted Stock) or Dividend Equivalent Rights shall be forfeited (whether or not
such forfeiture is expressly contemplated hereunder); (ii) interpret the Plan and the Award Agreements hereunder, with such interpretations to be conclusive and binding on all persons and otherwise accorded the maximum deference permitted by law,
provided that the Committee’s interpretation shall not be entitled to deference on and after a Change in Control except to the extent that such interpretations are made exclusively by members of the Committee who are individuals who served as
Committee members before the Change in Control; and (iii) take any other actions and make any other determinations or decisions that it deems necessary or appropriate in connection with the Plan or the administration or interpretation thereof. In
the event of any dispute or disagreement as to the interpretation of the Plan or of any rule, regulation or procedure, or as to any question, right or obligation arising from or related to the Plan, the decision of the Committee, except as provided
in clause (ii) of the foregoing sentence, shall be final and binding upon all persons. Unless otherwise expressly provided hereunder, the Committee, with respect to any grant, may exercise its discretion hereunder at the time of the Award or
thereafter. No action which is otherwise permitted under or in connection with the Plan shall be prohibited hereunder 
  

 18 








 merely because it constitutes a repricing of an Award, and, in furtherance of the foregoing, the Committee is expressly
authorized and empowered, without limitation, to effect repricings that are consistent with the terms of the Plan. The Board may amend the Plan as it shall deem advisable, except that no amendment may adversely affect a Participant with respect to
an Award previously granted unless such amendments are required in order to comply with applicable laws; provided that the Board may not make any amendment in the Plan that would, if such amendment were not approved by the holders of the Common
Stock, cause the Plan to fail to comply with any requirement of applicable law or regulation, unless and until the approval of the holders of such Common Stock is obtained. 
  
 14. CHANGES IN CAPITAL STRUCTURE. 
  
 (a) If (i) the Company or its Subsidiaries shall at any time be involved in a merger, consolidation, dissolution, liquidation, reorganization, exchange of
shares, sale of all or substantially all of the assets or stock of the Company or its Subsidiaries or a transaction similar thereto, (ii) any stock dividend, stock split, reverse stock split, stock combination, reclassification, recapitalization or
other similar change in the capital structure of the Company or its Subsidiaries, or any distribution to holders of Common Stock other than cash dividends, shall occur or (iii) any other event shall occur which in the judgment of the Committee
necessitates action by way of adjusting the terms of the outstanding Awards, then: 
  
 (x) the maximum aggregate number of Shares which may be made subject to Options and Dividend Equivalent Rights under the Plan, the maximum
aggregate number and kind of Shares of Restricted Stock that may be granted under the Plan, and the maximum aggregate number of Phantom Shares and other Awards which may be granted under the Plan may be appropriately adjusted by the Committee in its
discretion; and 
  
 (y) the Committee shall take
any such action as in its judgment shall be necessary to maintain the Participants’ rights hereunder (including under their Award Agreements) with respect to Options, Phantom Shares and Dividend Equivalent Rights (and other Awards under Section
9), so that they are substantially proportionate to the rights existing in such Options, Phantom Shares and Dividend Equivalent Rights (and such other Awards under Section 9) prior to such event, including, without limitation, adjustments in (A) the
number of Options, Phantom Shares and Dividend Equivalent Rights (and other Awards under Section 9) granted, (B) the number and kind of shares or other property to be distributed in respect of Options, Phantom Shares and Dividend Equivalent Rights
(and other Awards under Section 9), (C) the Option Price and Phantom Share Value, and (D) performance-based criteria established in connection with Awards; provided that, in the discretion of the Committee, the foregoing clause (D) may also be
applied in the case of any event relating to a Subsidiary if the event would have been covered under this Section 14(a) had the event related to the Company. 
  
 (b) Any Shares or other securities distributed to a Grantee with respect to Restricted Stock or otherwise issued in substitution of Restricted Stock shall
be subject to the restrictions and requirements imposed by Section 6, including depositing the certificates therefor with the Company together with a stock power and bearing a legend as provided in Section 6.2(a). 
  
 (c) If the Company shall be consolidated or merged with another corporation
or other entity, each Grantee who has received Restricted Stock that is then subject to restrictions imposed by Section 6.3 may be required to deposit with the successor corporation the certificates for the stock or securities or the other property
that the Grantee is entitled to receive by reason of ownership of Restricted Stock in a manner consistent with Section 6.2(b), and such stock, securities or other property shall become subject to the restrictions and requirements imposed by Section
6.3, and the certificates therefor or other evidence thereof shall bear a legend similar in form and substance to the legend set forth in Section 6.2(a). 
  

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 (d) If a Change in Control shall occur, then the Committee, as constituted immediately before the Change
in Control, may make such adjustments as it, in its discretion, determines are necessary or appropriate in light of the Change in Control, provided that the Committee determines that such adjustments do not have an adverse economic impact on the
Participant as determined at the time of the adjustments. 
  
 (e)
The judgment of the Committee with respect to any matter referred to in this Section 14 shall be conclusive and binding upon each Participant without the need for any amendment to the Plan. 
  
 15. MISCELLANEOUS. 
  
 15.1 No Rights to Employment or Other Service. 
  
 Nothing in the Plan or in any grant made pursuant to the Plan shall confer on any individual any right to continue in the
employ or other service of the Company or its Subsidiaries or interfere in any way with the right of the Company or its Subsidiaries and its shareholders to terminate the individual’s employment or other service at any time. 
  
 15.2 No Fiduciary Relationship. 
  
 Nothing contained in the Plan (including without limitation Sections 7.5(c)
and 8.4, and no action taken pursuant to the provisions of the Plan, shall create or shall be construed to create a trust or any kind, or a fiduciary relationship between the Company or its Subsidiaries, or their officers or the Committee, on the
one hand, and the Participant, the Company, its Subsidiaries or any other person or entity, on the other. 
  
 15.3 Notices. 
  
 All notices under the Plan shall be in writing, and if to the Company, shall be delivered to the Board or mailed to its principal office, addressed to the
attention of the Board; and if to the Participant, shall be delivered personally, sent by facsimile transmission or mailed to the Participant at the address appearing in the records of the Company. Such addresses may be changed at any time by
written notice to the other party given in accordance with this Section 15.3. 
  
 15.4 Exculpation and Indemnification. 
  
 The Company shall indemnify and hold harmless the members of the Board and the members of the Committee from and against any and all liabilities, costs and expenses incurred by such persons as a result of any act or
omission to act in connection with the performance of such person’s duties, responsibilities and obligations under the Plan, to the maximum extent permitted by law, other than such liabilities, costs and expenses as may result from the gross
negligence, bad faith, willful misconduct or criminal acts of such persons. 
  
 15.5 Captions. 
  
 The use
of captions in this Plan is for convenience. The captions are not intended to provide substantive rights. 
  

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 15.6 Governing Law. 
  
 THE PLAN SHALL BE GOVERNED BY THE LAWS OF MARYLAND WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS. 
  

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